DEVENDRA MITTAL vs. DY.C.I.T.SRIGANGANAGAR

ITA/85/2010HC RajasthanRJHC01042486200911 April 2018Author: GOPAL KRISHAN VYAS,RAMCHANDRA SINGH JHALA7 pages
AI SummaryDismissed

What were the facts?

The appellant, Devendra Mittal (HUF), reported income from purchase and sale of shares of listed companies as short-term and long-term capital gains for the relevant assessment year. The assessee claimed exemption on long-term capital gains under Section 112 and paid tax at 10% on short-term capital gains under Section 111A. The Assessing Officer (AO) treated these transactions as business income due to the high volume of transactions (247 purchases and 263 sales in AY 2005-06), the lack of significant dividend income, and the use of borrowed funds. The CIT(A) allowed the assessee's appeal, cancelling the AO's action. However, the Income Tax Appellate Tribunal (ITAT) restored the AO's order by allowing the Revenue's appeal.

What did the High Court hold?

The High Court held that the substantial question of law framed was answered against the appellant and in favour of the Revenue. The Court found that the appellant did not dispute the high volume of transactions (247 purchases and 263 sales). It was the assessee's burden to establish their intention by producing accounts that distinguished between shares held as stock-in-trade and those held as investment. Since the appellant failed to produce any material to show this distinction, they were not entitled to claim the benefit of capital gains. The Court considered the affidavit filed by the assessee before the CIT(A) insufficient, as the primary duty was to maintain records and produce evidence. Therefore, the entire case was based on factual aspects, and the question of law was not significant enough for adjudication. The appeal was dismissed.

What were the issues?

1. Whether the Tribunal was justified in holding that the transaction in question is a business transaction and not short-term/long-term capital gain, turning on the distinction between investment and trading in shares. Assessee's arguments: The transactions were in the nature of investment, and thus the claim for short-term and long-term capital gains was correct. The AO erred in treating the income as business income solely based on the number of transactions. The assessee relied on Sections 2(29A), 2(29B), 2(42A), and 2(42B) of the Income Tax Act, which are applicable to capital assets. An affidavit filed before the CIT(A) supported the claim. Revenue's arguments: The AO and ITAT were justified in treating the income as business income due to the high volume of transactions (247 purchases and 263 sales). The assessee failed to produce evidence to distinguish between shares held as stock-in-trade and those held as investment, a burden that lay on the assessee. The ITAT relied on the Supreme Court judgment in CIT vs. Associate Industrial Development Company Pvt. Ltd.

Which sections of the Income-tax Act were involved?

Section 111A,Section 112,Section 260A,Section 2(29A),Section 2(29B),Section 2(42A),Section 2(42B)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 85 / 2010 Devendra Mittal (HUF) Through Karta of Family, Devendra MIttal, 37-K, Block, Sri Ganganagar. ----Appellant Versus Deputy Commissioner of Income Tax, Sri Ganganagar. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Suresh Ojha. For Respondent(s) : Mr. K.K. Bissa. _____________________________________________________ HON'BLE MR. JUSTICE GOPAL KRISHAN VYAS HON'BLE MR. JUSTICE RAMCHANDRA SINGH JHALA

J U D G M E N T

Date of Judgment

11/04/2018

In this Income Tax appeal, the following substantial question of law was framed while admitted the present appeal on 27.09.2010: “Whether Tribunal was justified in holding that transaction in question is a business transaction and not short term/long term capital?”

As per facts of the case, appellant is HUF, headed by Devendra Kumar Mittal, as “Karta”. For the relevant year, source of income of the appellant HUF were interest income and income

(2 of 7) [ITA-85/2010]

from purchase and sale of shares of listed companies through different stock exchanges

The order continues below.

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